FRANKFURT (Reuters) - German bearings maker Schaeffler said it would cut 900 jobs, shut plants and reduce its product range after its 2018 earnings slumped due to weak demand in Europe and China and it warned of a challenging few years ahead for the autos sector.
Its shares traded 8.5 percent weaker on Wednesday, after the company, which also supplies bearings to industry, announced a new restructuring programme, RACE, which would cost 60 million euros (52 million pounds) in 2019.
Chief Executive Klaus Rosenfeld described it as “braking and accelerating at the same time”, as the programme aims to improve earnings by approximately 90 million euros, or the EBIT margin by 100 basis points, in its initial phase.
“We anticipate that the environment, especially in the global automotive business, will remain extremely demanding and challenging. At the same time, we expect the global economy to slow down further,” he said.
Schaeffler said 2018 adjusted earnings before interest and taxes fell 13 percent to 1.38 billion euros, while revenue rose 3.9 percent. It expects revenue to grow by 1-3 percent in 2019 and sees an EBIT margin before special items of 8-9 percent.
Rosenfeld said it would not be smart to announce new mid-term targets at the moment.
Lower growth for Schaeffler’s automotive branch in the second half of 2018 was due to weaker demand in Europe following new emissions standards and the trade conflict with the United States which hurt orders from China.
Adding to the gloomy outlook for the industry, small-cap Swiss autos supplier Autoneum, which makes heat and noise reduction components, fell 9.3 percent after reporting a drop in profitability. It is struggling to turn around its loss-making U.S. business and recoup investments in China.
Schaeffler is especially vulnerable to the shift to electric vehicles, which use practically no bearings, unlike the combustion engine.
“We want to further reduce the large extent to which we rely on the internal combustion engine while - being an innovative technology partner to our customers - utilising the opportunities offered by the fields of hybridization and electrification much more extensively,” Rosenfeld said.
“We started later in electric mobility than others did, but we are working now to catch up.”
The company dropped out of the German midcap index (Mdax) on Tuesday after its market capitalisation almost halved within nine months. Rosenfeld added Schaeffler did not belong to the small-caps index and he would do whatever it takes to return to the Mdax. It kept its dividend stable at 55 cents a share.
Reporting by Arno Schuetze and Alexander Huebner; Writing by Riham Alkousaa; editing by Jason Neely